Tag: project Management

This blog post is about a situation that is common for many projects and project managers especially in the construction industry. An organization signed a contract for fulfilling a client’s need and engages a project manager to deliver the project. This project manager was not necessarily involved in the project initiation phase. Sometimes the project manager is even entirely new to the contractor’s organization. In order to succeed, the project manager has to prepare himself/herself and has to follow 9 Steps How to Start a New Project.

Primarily the below considerations focus on the contractor and its organization, not necessarily on the client in the first place.

It is important for the new project manager to understand the contractor’s organization, existing standards and procedures prior to engaging further in the project. It is also important for him or her to get access to a complete set of documents and to evaluate them as far as possible.

The project manager schedules an internal kick-off meeting at the earliest after his/her document review. He shares the agenda in advance to give participants a fair chance to prepare and understand expectations.

List of 9 Steps How to Start a New Project

1. Project Charter

The most important one out of the 9 Steps How to Start a New Project is in my opinion to sign a project charter as early as possible. Find a template HERE. The project charter nominates the project manager and gives him or her authority. It also provides clarity to the structure of the team.

2. Business Case

Sometimes company leaders can not give clear answers to the following questions:

Why did we sign this contract?

Why did the client choose us over others?

What went well and what did not go so well in previous projects for the same client?

What are the success factors?

Who are nominated project partners?

The whole project team needs to know exactly why a project contract was signed.

3. Scope of Work Statement (Scope Baseline)

Someone with involvement in pre-contractual communications explains the scope of works. He emphasizes on scope inclusions and specific scope exclusions. He also explains assumptions, which are not yet finalized.

The team members review the deliverable list and decompose them into smaller better manageable packages and further into activities and tasks. The result is the work breakdown structure document. Often a work breakdown structure is provided by the client to fit into their planning. In that case it must be checked if it is complete and reasonably detailed. Other documents and structures such as the time schedule and, ideally, the budget are based on it.

4. Resource and Duration Estimates (Schedule Baseline)

The company committed to deliver a certain product or service within a certain time limit. The time limit estimate is based on factors such as resources and duration estimates. The planner who has prepared this initial planning explains his estimation approach and based on which considerations he came to his conclusion.

The project manager works out a detailed schedule with his team soonest possible.

5. Budget Breakdown (Cost Baseline)

I wrote about cost control in my previous post. Unfortunately, many only have cost control in mind. I’m certainly not against cost control, but the better approach is focusing on cost management, keeping in mind that other management areas are equally important.

The organization has committed itself to delivery a product or service at a certain price. The estimator, who calculated this price, explains his calculations in detail and the budget preparation methodology. Because here’s the catch. As described, the contract is signed, the basic planning is done with more or less care and the project manager – you – mainly only carries out the work and monitors and controls it. On the cost calculation and the resulting budget, he has virtually no more influence.

The estimator therefore shares his estimation sheet with the project manager and explains the used:

Estimation methods,

Resource loading,

Duration estimates,

Considered overheads and risk contingencies.

What are the funding requirements and what is the expected return of the investment?

6. Team Structure

The project manager considers the preparation of the project organization chart as a high priority. During the internal kick-off meeting all key players and functions are geared towards the same common goal. Therefore through their participation in the meeting, colleagues understand that they belong to the team. The project manager observes the level of influence and relationships among colleagues and watches out for internal politics.

He also uses the meeting to clarify reporting structures. There will be colleagues who only work a certain part of their time for the particular project. For this proportion of time they are answerable to the project manager. Therefore the project manager ensures to make everybody aware of this.

7. Technologies Needed

I talked about resources above. Those resources are primarily human resources, machinery and tools, as well as material. Because construction projects are usually not done from the main office, in most cases a construction site office with communication and other facilities is needed. Data access and data backup is a topic in this context. The establishment of such a bureau is often insufficiently considered in the pricing, if this is not expressly mentioned in the deliverables.

8. Initial Risk Register

The estimator must introduce the initial risk register, which he or she had taken into account in the pricing. This is actually very important, but often neglected. The risk contingency instead is often only assumed as a certain percentage. I am convinced that poor risk management will cost some companies their ISO 9001 certification this year. But that is not up for debate here.

In many cases, the only risk considered is a possible price increase for steel or cement.

Feel free to download my risk register HERE. It already includes many common construction related risks to give you an idea to start with.

9. Current Status

The project manager and large parts of the team are only hired after the organization having signed a contract with the client. As much as this is understandable, the disadvantage is that this easily and quickly leads to an initial time delay. Thereby the team and the company lose precious time for mobilization and kicking-off the works. That’s why it’s important to evaluate the current progress and status of the project.

Questions that are urgent to answer:

What are the works enablers?

Is the notice to proceed received?

Is the design complete and approved?

Are licenses and permits in place?

What is the mobilization status?

Are urgent materials and other resources ordered or organized?

The team agrees on an action list and a short-term planning for the transitional period, to get out of the current situation.

A remark at the end. Action lists are for some a bit outdated and unfortunately often a document that snoozes in the email inbox until 5 minutes before the next meeting. Consider dividing a large whiteboard into a parking-like structure. Assign a parking space to every individual and post tasks in it as sticky notes. Everyone moves notes from their parking space towards the exit upon task completion. Tasks than exit the parking after review during the next meeting.

Controlling costs surely is a very important process in project management and one of the first responses when asking people’s opinion about a project manager’s role. While cost control certainly indeed is very important, it is only a part of cost management. Without other management areas not equally taken care of, cost management will never succeed. This article is about how to manage project cost the right way and covers the following processes:

Knowledge Areas in Project Management

The image shows the knowledge areas covered by Project Managers. The percentages are a result of a small assessment among website visitors. It presents their opinion about the daily activities carried out by project managers. It is difficult to classify whether cost management is the most important part of project management. This entirely depends to individual projects and their objectives. Further are the different processes across all knowledge areas linked too close to make such a differentiation.

Project manager as a prisoner in a triangle

Project managers are often prisoners in a triangle of scope, time and cost. This symbolization makes it clear that all management areas are fundamentally related and cannot function individually. Neither side of the triangle can be changed without affecting the others. Therefore, this symbolization also illustrates the importance of treating all management areas equally important.

According to own observations and exchange of experiences among colleagues, the actual cause of cost overruns are often:

Insufficient scope elaboration, which may include quality and other requirements,

Creating schedules not detailed enough and not according to best practices, and

Incorrect resource estimates.

Please share your experience and leave a comment below.

Problems in Cost Management

One problem in the construction industry results from the fact that many companies are getting the project manager on board too late. I assert this based on the observation that construction companies often have very little involvement in the initiation phase. Instead, they offer for a job and usually do not take any further action, including the engagement of a project manager, until contract award. The almost immediate start of construction activities is expected often directly after contract award. Consequently the planning phase comes up short. Especially since the project manager and his team are often still not on board at this time. Also read my article about common problems in construction projects. Construction companies that quote for certain projects are very much focused on making offers and securing a contract. Such offers are often based on

Mountains of assumptions,

Historical and/or unverified data from previous projects, and

Missing project detail knowledge.

In this way, an offer can never come about, which in relation to the cost estimate even comes close to the later actual costs.

1. Planning Project Cost Management

Many project managers create a schedule and look at it as “the planning”. That is of course wrong and insufficient. A project manager covers 10+ management areas, depending on the industry. Each area requires a thorough planning, this of course also applies to cost management.

Planning cost management is therefore mainly concerned with

Setting the framework for each of the cost management processes so that performance of the processes will be efficient and coordinated, and

Describing the cost management processes in the project cost management plan, which becomes a component of the overall project management plan.

Management plans and other documents are reusable with some adaptation for several projects. Therefore I cannot accept a common project manager’s answer, that there would be more important things to do, and that there is no time for plan preparation. So, use your plan from your last project, or wasn’t there enough time? In that case check out this link, I share my templates with you for free.

2. Estimating Project Cost

No way to get cost right if ignoring the rest

Many construction companies are focused on pricing a particular project. Although other processes are a basis for this, they are often not worked on or postponed until afterwards. These processes include:

Collecting and understanding stakeholder requirements,

Decomposing scope into manageable packages,

Estimating resources,

Estimating durations, and

Evaluating risks.

How can you get the cost estimate right, if you miss out these important processes? If you get this wrong, there is little to control later. Maybe only frustration…

Something that you may hear over and over again on construction projects are statements like “The crazy HSE officers hinder us from doing our work and cost us too much time and money with their overblown requirements.” Well, probably most of these requirements were even documented before bid submission and should have been considered in calculations.

Another common mistake is the inadequate consideration of time and resources. Jobs are often priced according to following sample formula:

This initially looks relatively logical even so I did not include formworks. However, it must be remembered that between concreting and plastering, as well as between plastering and painting up to 28 days have to pass to allow for curing. Curing by the way is an activity and requires resources. But if you price a bill of quantities (BoQ) you will usually not find this item. In other words, without decomposing the scope into manageable packages, estimating resources for each and every activity and task, and estimating their duration, there is great possibility of forgetting it.

I hope that sounds logic, right? I can tell you, the reality is often different.

Budget preparation is a project manager’s task. In order to perform this task he or she must be involved early enough in the process. If the PM gets engaged after the contractor signed a contract and consequently committed himself to a price and duration, it is very difficult to get this project back on track.

That means in summary the PM’s starting position is as follows:

Weeks time delay at the time of engagement,

Scope and requirements possibly not evaluated thoroughly,

Time and resources possibly estimated wrongly or incomplete,

A so-called budget is grabbed out of thin air and is a “done deal”.

What could be the likelihood that this project will finally become a success? I’m looking forward to your comments.

The more correct and far more promising way would be:

Estimate thoroughly the cost per each activity bottom-up including resource and duration estimates as described above,

Aggregate the activity costs to figure out the cost per work package and consequently for each deliverable,

Add the risk contingency.

4. Control Project Cost

As long as above processes are not performed correctly, not much is left to control.

Otherwise controlling cost is about:

Ensuring that no money is expensed without the budget owner’s approval,

Preventing that expenditure exceed the individual budget per activity, work-package, and deliverable without authorization,

Monitoring cost and work performance and analyzing variances,

Managing overruns and ensure that overall project budget is maintained,

Influencing factors (such as scope changes etc.) that may result in a change to approved baselines,

How to make good decisions is subject to many books, articles and guidelines. We are taking decisions probably every single minute during the day. Nonetheless, the process of good decision making often still seems difficult and intuitive. This is especially true when all alternatives have a catch. Below method can help you to make the right decision – in your project as well as in private.

Collecting All Facts

One does not need more than a sheet of paper and a pencil to write down everything that may be relevant to a decision. That’s why the method is also called Consider All Facts (CAF). List all influencing factors in one column. In a second column, sort all factors into three groups according to their meaning with the most important ones on top of the list. Another column is for notes and ideas. The method provides an overview of open questions, however, does not give usually answers.

Pro and Cons List

Collect all pros and cons in a table with three columns. List in the first column everything that speaks in favor of a decision. Counter arguments go to the second column, and arrange ideas and questions in the third column.

Decision Matrix

The easiest way to compare alternatives is again a tabular overview. Provide a separate column for each alternative and write them one by one in the column headers beginning from the second column. Then determine evaluation criteria for options and include a short option description in the first column, each option in a separate row. Note points or grades in the columns how well each criterion is met. Aggregating all values gives an overall grade for each decision alternative.

Cost-Benefit Analysis

This analysis is a decision matrix in which a weighting is given to the individual evaluation criteria – depending on their importance. List mandatory criteria at the top of the list. Eliminate all options that do not meet one or more disqualifier criterion. The other criteria are weighted with percentages. Then multiply the points by the weight and sum them for each alternative.

Decision Tree

With a classic decision tree the results of different decision alternatives can be evaluated according to their statistical probability. The basic question is always: what happens if …?

One can also create a set of questions that have to be answered “yes” or “no” for each individual option. As soon as one “no” is recorded, the specific option is ruled out.

Scenario Analysis

The scenario analysis attempts to forecast future developments. At first the best and the worst case scenarios are developed. In between, a small number further scenarios with average values make sense. In this way, a picture of the future can be developed quite well.

Small and medium sized construction companies in Kenya seem to have a few problems in common. This article looks at a few of these issues that are causing construction projects in Kenya to fail and putting the executing companies at risk. The contents of this article about construction projects in Kenya are based on personal observations and discussions with other project managers.

The Main Root Cause that makes construction Projects in Kenya Fail

Even for significant construction works, there is not enough time to thoroughly prepare and submit quotations and related proposal documents. Often there is just one week or even less given to prepare and submit elaborate offers. The results are:

1. Superficial Tender Analysis Resulting in Inaccurate Costing

Due to the time pressure the contractor does not familiarize himself sufficiently with the specification details, which easily can be several hundred pages long for certain construction projects.

Here is the Risk:

The biggest risk here is probably that the construction company will later remain with unforeseen costs. For example because the contractor assumes to use a common material type while the specifications require a particular one. For instance the contractor expectes to install a normal cable while the specifications call for a specific fire rated cable.

Since this detail was known before the bid submission, but was not taken into account, the construction company will probably encounter extra expense.

2. Wrong Assumptions

Contractors assume that the execution of certain works will be similar to the execution of activities during previous projects, without estimating resources and duration thoroughly. Factors that may impact production rates are not well enough evaluated and considered.

Here is the Risk:

The risk is that, on the one hand, the contractor commits himself to unrealistic time schedules for the works execution, and on the other hand, possible time delays and additional resources will in any case incur additional costs.

Unless there are two absolutely identical projects in exactly the same place, at the same time, for the same client, with the same amount of work, the same specifications and quality features, etc., all projects are unique. This is at least true for the project product, while the project management processes remain the same, but may be weighted differently depending on the client.

3. Analogous Estimating

Because detailed cost estimates are not possible in the shortness of the time given, the contractor relies on figures based on historical date from previous projects.

Here is the Risk:

The use of historical data always carries the risk that it is out of date and moreover does not apply because it is based on different fundamentals. Consequently, this can result in additional unforeseen cost.

Therefore, it is very risky to simply take the details of a previous project and assume that the same result will be achieved under different circumstances.

4. Neglecting Important Documents and Information

Due the described time constraint the calculation of the offer price is almost exclusively based on filling the bill of quantities (BOQ), which is a document produced and provided by the client.

Here is the Risk:

The main risks are that certain features and deliverables may exist in the scope of works statement, in drawings or other tender documents, but may have been overlooked and not included in the BOQ and consequently aren’t priced. Secondly, the quantities to be finally executed are almost always deviant from the BOQ quantities. Both certainly have cost impact. Depending on the type of the contract it may be favorable to the contractor if quantities increase, but if quantities decrease the entire price calculation for the item may become wrong.

Once the contract including the scope of works statement has been signed, it is very difficult to agree changes with the client in this regard, as long as this information was known before the contract was signed.

Quantity deviations outside of a certain percentage often can lead to re-negotiations. It is important to notify the client in good time if quantities are likely to change significantly. The percentage may vary from country to country.

5. No Time for Risk Evaluation

Risk evaluation and planning is not given sufficient attention. Risk reserves, if any at all, are taken into account only by instinct and roughly.

Here is the Risk:

As long as risk reserves are not properly calculated and known, it is fundamentally uncertain whether they will be sufficient in the end.

I think one can say that every business is risky to some extent, and that’s especially true for the construction industry. With this knowledge in mind it is very incomprehensible that this important aspect is so often neglected or superficially treated.

6. Underestimated Client Expectations

More and more not only product quality, but also process quality, as well as health, safety and environmental considerations, play an important role and are often not sufficiently taken into account.

Here is the Risk:

This factors can quickly have a significant impact on cost and schedule if they are not sufficiently considered. Here, it seems as if construction companies are experiencing a terrific awakening, when projects are to be carried out for international clients, or when projects are funded by the African Development Bank or the International Finance Corporation.

The stakeholders mentioned above have a valid interest that what they finance makes sense, that the money is well spend, that no one is harmed or more than necessary impeded or inconvenienced, etc. It is the contractor’s responsibility to take these things into consideration and, of course, they are associated with effort and consequently cost.

7. Schedules are Not Prepared Following Common Good Practice

Resources and durations are not thoroughly estimated, the linkage of activities is not well enough realized and the entire time schedule does not follow international standards or common good practices, and seems to be geared towards creating a document that confirms that certain work will be completed by the given date.

Here is the Risk:

One of the biggest risks of missed project goals seems to be the problem described above. Any time delay automatically also affects the costs baseline, and any additional resource surely costs money.

Again and again it can be observed how little attention is paid to the preparation and the subsequent monitoring of a detailed time schedule. I believe it can be said that the better this is worked out, the greater the likelihood that project success will eventually materialize. Otherwise, material is ordered when the previous material is nearly used up, and everyone does as much as he or she are comfortable with and only too late it is observed that the resources and the required daily performance are in imbalance.

The schedule is simply a colorful document that is given no further value.

8. Too Late Staff Employment

Very often the project manager and team members will be hired only after the construction contract is finally signed. This hiring process can easily take a few weeks or even a month time. Often, the intended people are no longer available and people are hired who are known only from their resume and interview.

Here is the Risk:

Although the procedure is fundamentally understandable, it still has significant drawbacks, as the project manager and the core team’s late employment has a substantial impact on the detailed planning. Without or too late detailed planning, the entire project becomes a venture with an uncertain outcome with regards to cost and time.

Project Phases

Due to this problem projects are often delayed shortly after signing the contract and it is very difficult to make up for this initial delay. Not to mention lost customer confidence. Unfortunately the situation is such that the very late engagement of the project manager to some extent limits him or her initially to become the administrator of the current situation and his or her skills are only used to make the best out of it, until the planning deficits are reasonably worked up and corrected. The time span between points A and B is often lost immediately.

9. False Promises

Promises and commitments are made that may be hard or impossible to fulfill in order to secure the contract. These commitments almost always have a financial or a schedule background.

Here is the Risk:

False Promise

Unless it was considered from the beginning that the client will ask for a discount or for a quicker execution, such commitments are always made to the detriment of profits or contingencies, which as described above are anyway often not evaluated in details.

It is clear that almost nowhere in the world without negotiations and concessions, a contract is concluded. However, it is important to ensure that a contract is not signed at just any price. In the end, nobody benefits if promises are made that cannot be kept.

Many of the above problems and resulting risks can be avoided by just giving enough time for the perusal of the tender documents and engaging the right people in the right number and at the right time.